I don’t expect any portfolio hedges everything over a 2 year period.This is probably true in theory and in the long run. This was NOT true in rising rate / inflationary 2022-2023. Intermediate term treasures did better than total bond and TIPs. (presumably because the real return portion of TIPs went from negative to positive 2 percentage points +/-).The 3-fund portfolio with nominal bonds looks really good from a tailwind of falling interest rates for decades. The paper in question doesn't mean you have to adopt 100% equities to get anything out of the conclusion. It could be that you exchange nominals for TIPS for example, although, not as optimal as 100% equities but that doesn't matter. What matters is gliding to a nominal bond heavy portfolio in retirement can get murdered with high inflation and the longer you hold it, the more likely that will happen.
Obviously there are other ways to hedge inflation. Own stuff (i.e. a home) or iBonds are two examples.
Statistics: Posted by TimeIsYourFriend — Sun Mar 31, 2024 12:39 pm — Replies 35 — Views 2213